The question of how far the “Mitchell/Denton” principles apply to applications by defendants to set aside judgments was considered by the Court of Appeal in Regione Piemonte -v- Dexia Credop SpA[2014] EWCA Civ 1298. It can be seen that these principles are highly applicable when it comes to considering the delay in making the application. Anyone considering making an application to have judgment set aside should make it promptly.

THE CASE

Judgment had been entered in default in a complex dispute. Permission to set that judgment aside was refused by the judge at first instance, one ground being the delay by the defendant in making the application. It had been 17 months after the claim forms were served and 12 months after the default judgment (entered by a judge) before the defendant applied to set aside the judgment. The Court of Appeal heard the application for permission to appeal.

THE TEST FOR SETTING JUDGMENT ASIDE

The test for setting aside

In [30] and [31] of his judgment the judge set out the provisions of CPR 13 and what, in broad terms, he accepted were the applicable principles:

“30 CPR 13 provides in material part as follows: “(1)…the court may set aside or vary a judgment entered under Part 12 if – (a) the defendant has a real prospect of successfully defending the claim; or (b) it appears to the court that there is some other good reason why – (i) the judgment should be set aside or varied; or (ii) the defendant should be allowed to defend the claim.(2) In considering whether to set aside or vary a judgment entered under Part 12, the matters to which the court must have regard include whether the person seeking to set aside the judgment made an application to do so promptly.”

31 As to this, Ms Tolaney submitted that the applicable principles are, in summary, as follows:

i) The court’s power to set aside a default judgment pursuant to CPR 13.3 is discretionary.

ii) The burden rests upon the defendant to satisfy the court that there is good reason why a judgment regularly obtained should be set aside: ED&F Man Liquid Products Ltd v Patel [2003] EWCA Civ 472. Furthermore, depriving the claimant of a regular judgment which the claimant has validly obtained in accordance with CPR 12 is not something which the court will do lightly.

iii) In particular, CPR 13.3(2) gives added emphasis to the need for a defendant to show that it has acted “promptly” in seeking to set aside. More specifically:

b) Promptness will always be a factor of considerable significance and, if there has been a marked failure to make the application promptly, a court may well be justified in refusing relief, notwithstanding the possibility that the defendant may well succeed at trial: Standard Bank plc v Agrinvest International Inc [2010] EWCA Civ 1400 per Moore-Bick LJ at [22].

c) It follows that, by contrast with the test for summary judgment under CPR 24, under CPR 13.3 the merits of any proposed defence are just a factor which can be taken into account – and an unimportant or irrelevant factor where the failure to act promptly is particularly egregious.

d) Promptness is such an important factor because of the public interest in the finality of litigation, the need under the CPR to act expeditiously, and the requirement to have regard to the proper allocation of courts’ resources: Mullock v Price [2009] EWCA Civ 1222, per Ward LJ at [28].

iv) As regards the time period in which applications have been deemed to be “prompt”, the limit appears to be some way short of the 11 months that have elapsed in this case. Thus, 30 days has been deemed to be too long: Khan v Edgbaston Holdings [2007] EWHC 2444 (QB), per HHJ Coulson QC. It has been suggested that 59 days is “very much at the outer limit of what could possibly be acceptable”: Hart Investments v Fidler [2006] EWHC 2857“

Subject to an important qualification I would accept this as a broad summary of the relevant principles. CPR 13 makes clear (i) that the power to set aside is discretionary; (ii) that the conditions specified in CPR 13 (1) (a) or (b) are necessary, but not necessarily sufficient, conditions for the exercise of the discretion; and (iii) that the question as to whether the application has been made promptly is a mandatory and obviously, therefore, important consideration. It follows that a court may be entitled to refuse to set a judgment aside even if the defendant shows a real prospect that he may or might succeed in his defence at trial.

I, also, agree with the observation of the judge that there is no arbitrary time limit and that each case must ultimately depend on its own facts.

The qualification is that it does not seem to me that the merits of any defence are ever irrelevant if by that the judge meant that the court will not even consider them. When it does consider them, it may conclude that they are of little or no weight. The court is engaged in an exercise of weighing delay against merits, which will include considering the nature and extent of the delay, the reason and any justification for it, the strength of the supposed defence and the justice of the case. The stronger the merits (and any justification for the delay) the more likely it is that the Court may be prepared to exercise its discretion to set aside a judgment regularly obtained despite the delay and vice versa. That is not to say that a real or even a good case on the merits will usually lead to the judgment being set aside despite significant delay since delay is now a much more potent factor than heretofore. If there is a marked and unjustified lack of promptness, that, itself, may now justify a refusal of relief because the delay is a factor that outweighs the defendants’ prospect of success. As Moore Bick LJ recognised in Agrinvest the climate has changed with the introduction of the CPR from that which applied when this court in JH Rayner (Mincing Lane) Ltd v Cafenorte S.A. Importadora e Exportadora S.A. [1999] 2 Lloyds Rep 750 upheld a decision of his own setting aside a judgment after a delay of 7 ½ years.

Eder J cited Agrinvest for the proposition that “a court may well be justified in refusing relief, notwithstanding the possibility that the defendant may well succeed“, when the phrase Moore Bick LJ in fact used was “notwithstanding the possibility that the defendant might succeed at trial“. I do not regard this as a significant error. The proposition can be stated using either the subjunctive or the optative provided it is recognised that the relative strength of the defence is to be weighed against the fact and nature of delay.

THE RELEVANCE OF THE MITCHELL PRINCIPLES

The effect of Mitchell

A question arose at the hearing of the appeal as to the extent to which the principles laid down in Mitchell v News Group Newspapers Ltd[2014] 1 WLR 795 applied to applications to set aside a default judgement. Since the hearing this Court has given judgment in Denton v TH White Ltd [2014] EWCA Civ 906 and the parties have made written submissions on it. Neither case was concerned with applications to set aside a judgment.

In essence Piedmont submits that the Mitchell/Denton principles do not apply to an application to set aside a default judgment. The majority in Denton considered that the Mitchell decision was correct to attribute a particular importance to the factors listed at CPR 3.9 (1) (a) (the need “for litigation to be conducted efficiently and at proportionate cost“) and (b) (the need “to enforce compliance with rules, practice directions and orders“) because the Civil Procedure Rule Committee had rejected a recommendation in the Review of Civil Litigation Costs Final Report that CPR 3.9.1 should be reworded so that 3.9.1 (b) read “the interests of justice in the particular case“. But the Final Report did not propose any amendment to CPR 13.3 so that the reasoning of the majority in Denton does not apply to it. There is thus, it is submitted, no reason to conclude that the Mitchell/Denton principles apply to an application under CPR 13.3 or that promptness under CPR 13.3 should be regarded as anything more than a factor. I disagree.

In my judgment the matter stands thus. CPR 13.3 requires an applicant to show that he has real prospects of a successful defence or some other good reason to set the judgement aside. If he does, the court’s discretion is to be exercised in the light of all the circumstances and the overriding objective. The Court must have regard to all the factors it considers relevant of which promptness is both a mandatory and an important consideration. Since the overriding objective of the Rules is to enable the court to deal with cases justly and at proportionate cost, and since under the new CPR 1.1 (2) (f) the latter includes enforcing compliance with rules, practice directions and orders, the considerations set out in CPR 3.9 are to be taken into account: see Hussein v Birmingham City Council [2005] EWCA Civ 1570 per Chadwick LJ at [30]; Mid-East Sales v United Engineering and Trading Co (PVT) Ltd[2014] EWHC 1457 at [85]. So also is the approach to CPR 3.9 in Mitchell/Denton. The fact that the Court’s judgment in Denton was reinforced by the fact that CPR 3.9 was not reworded in the manner proposed by Jackson LJ does not detract from the relevance of CPR 3.9, and what was said about it in Denton, to applications under CPR 13.

Denton makes clear that any application for relief against sanctions involves considering (i) the seriousness and significance of the default (ii) the reason for it and (iii) all the circumstances of the case. At the third stage factors (a) and (b) in CPR 3.9 are of particular, but not paramount, importance.

The judge concluded that the delay in making the applications to set aside the Cooke judgment was both significant and serious and, of itself, sufficient to justify their dismissal. In any event he was not persuaded that Piedmont had any real prospect of success or that there was any other good reason for setting aside the judgment of Cooke J.

As to the delay, he held that Piedmont had failed to act promptly to seek to set aside and that such delay was a very strong factor in favour of dismissing the applications. The Claim forms in the Declaratory Actions were served in January 2012, some 17 months before the hearing before him, and for most of the time since then Piedmont had taken a deliberate decision to ignore the proceedings. He rejected Ms Newman’s submission that that was a reasonable decision to take because of (i) the view taken in Avv Iaquinta’s report, (ii) advice received from the Corte dei Conti that Italian local authorities should exercise their self-redress powers and (iii) because the validity of autotutela was a question of Italian law. In his view a defendant who deliberately ignored proceedings duly instituted and properly served did so at his peril, particularly where that defendant had expressly agreed on English law and jurisdiction to govern the relationship. Whatever merits might exist in the self-redress process provided no justification for the decision of Piedmont to ignore the Declaratory Actions.

The judge was fully entitled to take the views expressed in the previous paragraph. The delay was sizeable; and its character provided cogent reason not to exercise the discretion in Piedmont’s favour. Piedmont had irrevocably agreed to the application of English law and the jurisdiction of the English Courts. On advice from Italian (but not English) lawyers it made a deliberate decision not to engage with litigation, of which it had proper notice, validly brought in an English court whose jurisdiction it did not seek to challenge or stay, and whose determination it did not seek to adjourn. It did so because it thought (wrongly) that it could achieve the result it sought by an Italian law administrative procedure and thereby avoid English jurisdiction. When that failed, and after a further five months delay following the notification to it of the decision in January 2013 (described by the judge as “wholly unacceptable“) it finally got round to applying to set aside the judgment of Cooke J very shortly before the hearing of the Banks’ application for summary judgment. It does not appear to have taken any advice about the English proceedings until April 2013.

I do not accept that the judge gave inappropriate weight to the fact that Piedmont deliberately decided not to engage with the litigation. Nor do I regard Piedmont’s want of familiarity with English court process as a redeeming feature. It could always have taken advice. It is, also, apparent from reading the Claim form that judgment might be entered if there was no acknowledgment. The fact that the delay did not itself disrupt future hearing dates does not reduce its seriousness. The approach taken by Piedmont has, in any event, caused delay and cost, and used up considerable court resources. If the judgment were to be set aside the proceedings before Cooke J will have been futile.

THE CONCLUSION

Conclusion

I do not regard Piedmont as having established that the judge’s refusal to set aside the default judgment or his grant of summary judgment on the monetary claims were in error. Whilst in limited respects I have found that there was a realistic prospect of establishing non-compliance with Italian law that is not sufficient to justify setting aside the judgment. In my view the extent and character of the delay alone afforded, in this case, good grounds to refuse to set the judgment aside even if the defence had a real prospect of success. In the light of the character and extent of that delay it would require a defence of some considerable cogency, based on pretty convincing evidence, particularly on the question of capacity, to justify setting the default judgment aside. The judge was entitled to take the view that there was no real prospect of Piedmont succeeding or, at any rate, none with a sufficient degree of conviction to justify setting aside the default judgment in the circumstances of the present case.

PUTTING MATTERS IN PERSPECTIVE

It is important to put matters into perspective. This was an application made 12 months after judgment was entered and where the defendants had deliberately not engaged in the court process. However it illustrates the dangers of delay.